S&P 500 and FTSE 100 are among those to fall as investors worry that global growth is weakening
Global markets took a steep fall on May 9 as fears over a slowdown in China’s export growth and rising inflation stimulated worries about the health of the world economy.
Stocks in the US, Europe, and Asia Pacific markets all slumped into the red as investors worried that global growth is deteriorating. All this is happening at a time when central banks are raising interest rates to stifle the rising inflation.
The FTSE 100 fell to its lowest level in eight weeks in London, down 171 points or 2.32 percentage points to 7,216 at the close of trading on Monday, with mining companies being some of the major losers. Earlier on Monday, Japan’s Nikkei had collapsed by 2.5%.
Stocks tanked following China’s export growth hitting a near two-year low of 3.9 percent a year in April, a fall from 14.7% in March. Imports were slow, as Covid outbreaks in China stemmed demand and disrupted manufacturing.
The slowdown indicated that the world’s second-largest economy was bruised by lockdowns in big cities such as Shanghai. The lockdowns have snarled up logistics chains and have had an impact on factory production.
Mihir Kapadia, the chief executive of Sun Global Investments, stated:
“Two of the biggest concerns are supply chains and the impact of inflation, including higher interest rates. As a result of severe Covid lockdowns, China’s export growth is at a two-year low. The supply chain disruptions will in turn impact earnings of companies around the world, and thereby their stocks.”
European markets dropped to a two-month low, down 2.9% at the close of trading. In New York, the S&P 500 index fell by 3.2% on Wall Street – its lowest point in a year – after its worst stretch of weekly losses in over a decade. The tech-heavy NASDAQ dropped 4.29% as investors once more sold off the once-hot tech stocks.
Commodities weakened, with copper prices falling to their lowest since mid-December in London at $9,160 (£7,440) a tonne. Tin, zinc, nickel, aluminum, and lead prices also slumped, on concerns that restrictions in China are hitting manufacturing output.
Stocks in emerging markets hit their lowest level since June 2021, as China’s flattening economy intensified pressures from the ongoing disruption from the Ukraine war and rising global interest rates.
On Saturday, the Chinese premier, Li Keqiang, warned that China’s employment situation was “complex and grave”. He requested the government departments and regions to prioritize measures to retain and support jobs. That added to worries that China’s lockdowns are having a significant economic impact.
US government bonds were also hit by the latest selling, which escalated the yield, or interest rate, on the 10-year Treasury note to the highest since November 2018. When prices fall, yields rise.
The US dollar reached a new 20-year high, hiked by speculations of further high increases in US interest rates this year to stop rising inflation, which is running at 8.5%. Marios Hadjikyriacos of the brokerage XM commented:
“There’s no stopping the mighty US dollar. Stress in equity markets, worries about a synchronized global economic slowdown, and the relentless grind higher in US yields continue to drive up demand for the reserve currency.”
Also hit were risky assets such as cryptocurrencies. Bitcoin plunged to its lowest level since July last year, down below $32,700. The flagship crypto has lost half its value within the last six months.